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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

[Docket No. AS12-16]

Appraisal Subcommittee; Proposed Policy Statements

AGENCY: Appraisal Subcommittee of the Federal Financial Institutions Examination Council
ACTION: Proposed policy statements and request for comments.
SUMMARY: The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council requests public comment on a proposal to revise ASC Policy Statements (proposed Policy Statements). The proposed Policy Statements provide guidance to ensure State appraiser regulatory programs (Program)1 comply with Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended. The proposed Policy Statements would supersede the current ASC Policy Statements.

1The 50 States, the District of Columbia, and four Territories, which are the Commonwealth of Puerto Rico, Commonwealth of the Northern Mariana Islands, Guam, and United States Virgin Islands, have State appraiser certifying and licensing agencies with Programs monitored by the ASC through the Compliance Review process.

DATES: Comments must be received on or before October 29, 2012.
ADDRESSES: You may submit comments, identified by any of the following methods:

*Federal eRulemaking Portal: http://www.regulations.gov.Follow the instructions for submitting comments.

*E-Mail: webmaster@asc.gov.Include the docket number in the subject line of the message.

*Fax:(202) 289-4101. Include docket number on fax cover sheet.

*Mail:Address to Appraisal Subcommittee, Attn Lori Schuster, 1401 H Street NW., Suite 760, Washington, DC 20005.

All public comments will be made available on the ASC's Web site athttp://www.asc.gov(follow link in "What's New") as submitted, unless modified for technical reasons. Accordingly, comments will not be edited to remove any personal identifying or contact information.
FOR FURTHER INFORMATION CONTACT: James R. Park, Executive Director, at (202) 595-7575, or Alice M. Ritter, General Counsel, at (202) 595-7577, via Internet email atjim@asc.govandalice@asc.gov, respectively, or by U.S. Mail at Appraisal Subcommittee, 1401 H Street NW., Suite 760, Washington, DC 20005.
SUPPLEMENTARY INFORMATION: I. Background

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (Title XI), established the ASC.2 The purpose of Title XI is to provide protection of Federal financial and public policy interests by upholding Title XI requirements for appraisals performed for federally related transactions.3 Pursuant to Title XI, the ASC performs periodic Compliance Reviews of each State's Program to:

2The ASC Board is comprised of seven members. Five members are designated by the heads of the FFIEC agencies (Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and National Credit Union Administration). The other two members are designated by the heads of the Department of Housing and Urban Development and the Federal Housing Finance Agency.

3Refers to any real estate related financial transaction which: (a) a federal financial institutions regulatory agency engages in, contracts for, or regulates; and (b) requires the services of an appraiser. (See Title XI § 1121 (4), 12 U.S.C. 3350.)

• Determine its compliance, or lack thereof, with Title XI, and

• Assess its implementation of theReal Property Appraiser Qualification Criteria(AQB Criteria), as adopted by the Appraiser Qualifications Board (AQB).

The ASC originally adopted the Policy Statements in 1993. In 1997, the ASC added Policy Statements governing temporary practice and reciprocity. Since 1997, the Policy Statements have remained largely unchanged with the exception of amendments made by the ASC in 2008 to Policy Statement 10,Enforcement.Two recent occurrences necessitated revision of the Policy Statements:

1. Passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act); and

2. ASC implementation of its revised Compliance Review process in 2009.

States have already begun the process of implementing numerous statutory changes brought about by the Dodd-Frank Act.4 The proposed Policy Statements reflect both Dodd-Frank Act provisions that have been implemented by the States as well as provisions that are in process. As part of the revised Compliance Review process in 2009, the ASC changed the format of the Compliance Review Report issued to the States after the ASC completes its on-site review of a State's Program. The Compliance Review Report presents the findings of the ASC's on-site review of a State's Program, including areas of non-compliance with Title XI and recommendations for improvement.

4The ASC has issued two Bulletins notifying State Programs of statutory requirements brought about by the Title XI amendments resulting from the Dodd-Frank Act:

1.Bulletin 10-1,issued October 14, 2010, notified States that the ASC approved a modification of the annual National Registry fee to $40 from $25. To provide a reasonable transition period for implementation by the States, the fee increase became effective on January 1, 2012.

2.Bulletin No. 2011-01,issued March 18, 2011, addressed new requirements concerning reciprocity, qualification requirements for State licensed appraisers, minimum requirements for trainee appraisers and supervisory appraisers, course approval program of the Appraisal Foundation's AQB, and funding and staffing of State Programs.

The proposed Policy Statements are intended to provide States with the necessary information to maintain their Programs in compliance with Title XI. Further, the proposed Policy Statements address the ASC's authority to evaluate a State Program for compliance with Title XI and to take sanctions against a State when its Program does not comply with Title XI. The proposal also excludes provisions from the current Policy Statements that have become outdated or lack enforceability. Additionally, the proposal reflects consideration of recent amendments to the Uniform Standards of Professional Appraisal Practice (USPAP) and the AQB Criteria.

II. Summary of the Proposed Policy Statements

Proposed Policy Statements 1 thru 7 correspond with the seven categories evaluated during the ASC's Compliance Review process and included in the ASC Compliance Review Report to a State. Proposed Policy Statement 8 sets forth procedures in the event the ASC imposes interim sanctions against a State. The proposal also includes four appendices:

1. Appendix A provides an overview of the Compliance Review process and a revised rating system;

2. Appendix B provides a summary of requirements and related implementation standards for each Policy Statement;

3. Appendix C provides a glossary of terms; and

4. Appendix D contains previously issued ASC Bulletins and Supplements that provided States with guidance on compliance with the self-enabling provisions of the Dodd-Frank Act, including the effective date by which a State needed to take action.

III. Statement-by-Statement Analysis

The following provides a statement-by-statement analysis highlighting the changes to the current Policy Statements reflected in the proposal.

Introduction and Purpose

The proposal's introduction and purpose statement provides a brief overview of the ASC's authority and its monitoring function of State Programs to determine compliance, or lack thereof, with Title XI. Much of the explanatory language in the current Policy Statements, regarding functions of the ASC and the establishment of State Programs, is well known and presented in the ASC Annual Report to Congress and, therefore, is being omitted from the proposal. The proposal focuses rather on the Policy Statements' goal to provide States with necessary information to maintain their Programs in compliance with Title XI.

Policy Statement 1: Statutes, Regulations, Policies and Procedures Governing State Programs

Proposed Policy Statement 1 will consolidate and replace the first four current Policy Statements (State Regulatory Structure and Independence of Functions; Appraiser Classifications; Appraisal Standards; Written Appraisal Reports) and replaces Policy Statement 7 (Prohibition Against Discrimination).Policy Statement 1 will address the first area of review in the ASC Compliance Review process of a State Program's statutes, regulations, policies and procedures for compliance with Title XI.

Since State Programs are now established, much of the language in thecurrent Policy Statements with instructions on the initial establishment of an appraiser licensing and certification program has been eliminated. The proposal does preserve essential language concerning independence and ethical standards with deference given to State standards. The proposal reflects the authority the Dodd-Frank Act granted the ASC to review State Programs for adequate funding and staffing. The proposal also addresses the discussion on appraiser classifications, addressing the Dodd-Frank Act provisions concerning licensed level appraisers, as well as trainees and supervisors, and outdated language has been removed. The proposal also addresses the other credential designations used by States that should be distinguished from the federally recognized credentials. The discussion on the guidance issued by Federal financial institutions regulatory agencies and the statutory requirements outside of Title XI in the current Policy statements has been eliminated in deference to those provisions standing on their own. The proposal reflects an amendment to the current Policy Statements discussion on prohibiting discrimination to reflect the Dodd-Frank Act provision that allows criteria established by the Federal financial institutions regulatory agencies for appraiser qualifications to include membership in a nationally recognized professional appraisal organization.

The proposal addresses attendance by ASC Policy Managers at States' closed/executive sessions. The proposal explains how attendance at such meetings, except in the case of “quasi-judicial” proceedings specifically authorized by State statute, is an essential part of the ASC's monitoring function.

Policy Statement 2: Temporary Practice

Proposed Policy Statement 2 will replace the current Policy Statement 5 (Temporary Practice) and will address the second area of review in the ASC Compliance Review process pertaining to temporary practice for compliance with Title XI.

Proposed Policy Statement 2 provides a clear explanation of what the ASC will consider to determine whether a State's fees or requirements are excessive or burdensome to an appraiser's ability to work in a State on a temporary basis relative to the State's cost of processing and issuing a temporary practice credential. Burdensome requirements are specified separately for the “Home State agency” and the “Host State.” The proposal reflects that a fee for an initial permit and one extension in excess of $250 is an excessive fee. The ASC acknowledges that the current Policy Statement set the maximum fee of $150 in 1997 and recognizes that States' costs have increased over time. Using the Consumer Price Index Inflation Calculator from the U.S. Department of Labor, Bureau of Labor Statistics, the change in prices of all goods and services at a $150 fee in 1997 equaled about a $215 fee as of July 2012. The ASC considered this information and based the proposed maximum fee of $250 on revised Policy Statement 2 becoming final in 2012, and remaining in effect for several years.

The language in current Policy Statement 5 concerning the requirements of an appraiser to register for temporary practice in a State to perform a “technical review” is not included in the proposal. The ASC believes that text is outdated and unnecessary.

Policy Statement 3: National Registry

Proposed Policy Statement 3 will replace the current Policy Statement 8 (National Registry of State Certified and Licensed Appraisers) and Policy Statement 9 (Information Sharing), and will address the third area of review in the ASC Compliance Review process of a State Program's policies and practices pertaining to the ASC's National Registry for compliance with Title XI.

Proposed Policy Statement 3 addresses several Dodd-Frank Act amendments to Title XI concerning appraiser classifications and States' ASC National Registry reporting requirements. Several provisions in the current Policy Statements concerning the ASC National Registry are being updated or removed to reflect current ASC procedures. The proposal includes a discussion on the ASC National Registry's extranet application and security requirements for States (including designation of an Authorized Registry Official and adoption of a written policy to adequately protect the right of access, as well as the ASC issued UserName and Password). The proposal preserves the critical nature of information sharing among the States with regard to disciplinary actions taken against appraisers. The proposal requires States to notify the ASC as soon as practicable if it is determined that a credential holder listed on the National Registry does not, or did not, qualify for the credential held. The proposal also requires States to notify the ASC as soon as practicable in the event of voluntary surrenders, suspensions and revocations, or any action that interrupts a credential holder's ability to practice. Further, the proposal requires States to submit all “disciplinary actions” (as defined in the proposed Policy Statement) to the ASC via the extranet application for inclusion on the National Registry as of July 1, 2013.

Policy Statement 4: Application Process

Proposed Policy Statement 4 will replace numerous provisions in the current Policy Statement 10 (Enforcement)and will address the fourth area of review in the ASC Compliance Review process pertaining to a State Program's application process for compliance with Title XI.

Proposed Policy Statement 4 addresses requirements for:

(1) State's general processing of applications for an appraiser credential;

(2) An appraiser's qualifying education, including a State's verification that an applicant's education complies with AQB Criteria, and for verification and audit of an appraiser's continuing education credits for license and certification renewals;

(3) An applicant's compliance with AQB Criteria experience requirements, including the State's review and validation of an applicant's experience claims on initial credential or upgrade applications; and

(4) State's use and administration of an appropriate AQB-approved qualifying examination.

The proposed Policy Statement 4 is structured according to the type of application being processed (that is, an initial, upgrade, reinstatement, or renewal application). The proposal also includes a discussion on the procedures that a State should have concerning the verification, validation and audit of information in applications.

Policy Statement 5: Reciprocity

Proposed Policy Statement 5 will replace current Policy Statement 6 (Reciprocity)and will address the fifth area of review in the ASC Compliance Review process of a State Program's reciprocity policy for compliance with Title XI.

Proposed Policy Statement 5 sets forth the new reciprocity requirements mandated by the Dodd-Frank Act, and consequences to a State that fails to comply. Policy Statement 5 also provides examples of a State's implementation of a reciprocity process.

Title XI now requires that in order for a State's appraisers to be eligible to perform appraisals for federally related transactions, the State must have a reciprocity policy in place that will require issuance of a reciprocal credential IF:

1. the appraiser is coming from a State that is “in compliance”;

2. the appraiser holds a valid credential from that State; and

3. the credentialing requirements of that State (as they currently exist) meet or exceed those of the reciprocal credentialing State (as they currently exist).

Therefore, the proposal explains that appraisers relying on a credential from a State that does not have a compliant reciprocity policy in place are not eligible to perform appraisals for federally related transactions. A State may have a more lenient or more open door policy; however, States cannot impose additional impediments to issuance of reciprocal credentials. For purposes of implementing the Dodd-Frank Act's reciprocity requirements and considering the proposed rating criteria in Appendix A, States with an ASC Finding5 of “Poor” would not satisfy the “in compliance” provision for reciprocity. Further, as explained in the proposal, States would not be required to grant a reciprocal credential to an appraiser credentialed in another State with a current ASC Finding of “Poor.” On March 18, 2011, the ASC issued Bulletin No. 2011-01 to States that as of July 1, 2013, a State will be evaluated by the ASC for compliance with the new reciprocity requirements.

5 See below,Appendix A of the proposed Policy Statements,Compliance Review Process,for an explanation of ASC Findings.

Policy Statement 6: Education

Proposed Policy Statement 6 adds new discussion that is not in the current Policy Statements and will address the sixth area of review in the ASC Compliance Review process of a State Program's administration of education requirements for compliance with AQB Criteria and Title XI.

Proposed Policy Statement 6 provides States with specific requirements regarding course approval, including the approval of distance education courses (e.g., on-line courses), and refers to discussion in proposed Policy Statement 4 concerning qualifying and continuing education in the application process. As required by the Dodd-Frank Act, the proposal encourages States to accept courses approved by the AQB's Course Approval Program.

Policy Statement 7: State Agency Enforcement

Proposed Policy Statement 7 will replace several provisions in current Policy Statement 10 (Enforcement)and will address the seventh area of review in the ASC Compliance Review process of a State Program's administration of its enforcement program for compliance with Title XI.

Proposed Policy Statement 7 provides States with specific requirements to demonstrate that they are operating an effective and compliant enforcement program in addressing complaints against an appraiser. The proposed Policy Statement 7 addresses expectations for enforcement regarding: (1) Timeliness of complaint investigations and initiating enforcement action; (2) effectiveness of a State's enforcement process; (3) consistent and equitable treatment of an appraiser in the State's enforcement process; and (4) appropriate complaint documentation in a State's enforcement records, including specific requirements for tracking complaints of alleged appraiser misconduct or wrongdoing using an electronic complaint log.

Policy Statement 8: Interim Sanctions

Proposed Policy Statement 8 establishes a new ASC policy that addresses interim sanction authority the Dodd-Frank Act granted the ASC, and outlines due process considerations in the event the ASC exercises such authority.

Pursuant to the Dodd-Frank Act, the ASC has the authority to impose interim actions and suspensions against a State agency as an alternative to or in advance of a non-recognition proceeding against a State agency that fails to have an effective Program.6 The ASC is proposing that an “ASC Finding” of “Poor” on a State's Compliance Review Report would indicate that the State's Program is failing and, in turn, would trigger an analysis by the ASC for potential interim sanction. The Dodd-Frank Act's interim sanction authority specifically authorizes the ASC to remove a State licensed or certified appraiser from the National Registry on an interim basis, not to exceed 90 days, pending State agency action on licensing, certification, registration, or disciplinary proceedings. The proposed Policy Statement 8 addresses due process procedures that would provide a State with an opportunity to be heard or to correct conditions before the ASC imposes an interim sanction.

6Title XI § 1118(a), 12 U.S.C. 3347.

Appendices

The proposal includes four appendices. Proposed Appendix A provides an overview of the Compliance Review process, including revised ASC Compliance Review Findings (referred to as ASC Findings in this appendix) for rating a State's compliance, or lack thereof, with Title XI. The proposed ASC Findings rating criteria places particular emphasis on whether the State is maintaining an effective regulatory Program in compliance with Title XI. At the conclusion of the Compliance Review process, the ASC would assign the State's Program one of the five proposed ASC Findings (that is, a State's Program would be either “Excellent,” “Good,” “Needs Improvement,” “Not Satisfactory,” or “Poor”). As proposed, the ASC also would use the ASC Finding to establish the Review Cycle for that State. Proposed Appendix B provides a summary of requirements and related implementation standards for each of the proposed Policy Statements. Proposed Appendix C provides a glossary of terms to aid in the reading of the proposed Policy Statements. Proposed Appendix D will contain the ASC Bulletins and Supplements that have already been issued to assist States in understanding and complying with the self-enabling provisions of the Dodd-Frank Act.

IV. Request for Comment

The ASC seeks comment on all aspects of the revised Policy Statements, including any potential burden or cost to the States to comply with these Policy Statements. In addition, the ASC requests comments on the following specific questions:

1. Do the proposed rating criteria in Appendix A provide sufficient clarity to understand the differences among the ASC Finding categories?

2. Do the ASC Finding categories appropriately identify the degree of perceived risk of a Program's potential failure?

3. Do the ASC Finding rating criteria provide enough information to explain the judgment factors that the ASC will use to assess whether a State is in compliance with Title XI?

4. Do the revised Policy Statements achieve the ASC's goal in improving the understandability and enforceability of Title XI and the AQB Criteria?

5. Do the revised Policy Statements provide State Programs with the necessary information to understand the ASC's expectations of the Program during a Compliance Review?

The text of the proposed Policy Statements is as follows:

Table of Contents Introduction and Purpose Policy Statement 1 Statutes, Regulations, Policies and Procedures Governing State Programs A. State Regulatory Structure B. Funding and Staffing C. Minimum Criteria D. Federally Recognized Appraiser Classifications E. Non-Federally Recognized Credentials F. Appraisal Standards G. Prohibition Against Discrimination H. Exemptions I. ASC Staff Attendance at State Board Meetings J. Summary of Requirements Policy Statement 2 Temporary Practice A. Requirement for Temporary Practice B. Excessive Fees or Burdensome Requirements C. Summary of Requirements Policy Statement 3 National Registry A. Requirements for the National Registry B. Registry Fee and Invoicing Policies C. Access to National Registry Data D. Information Sharing E. Summary of Requirements Policy Statement 4 Application Process A. Processing of Applications B. Qualifying Education for Initial or Upgrade Applications C. Continuing Education for Reinstatement and Renewal Applications D. Experience for Initial or Upgrade Applications E. Examination F. Summary of Requirements Policy Statement 5 Reciprocity A. Reciprocity Policy B. Application of Reciprocity Policy C. Appraiser Compliance Requirements D. Summary of Requirements Policy Statement 6 Education A. Course Approval B. Distance Education C. Summary of Requirements Policy Statement 7 State Agency Enforcement A. State Agency Regulatory Program B. Enforcement Process C. Summary of Requirements Policy Statement 8 Interim Sanctions A. Authority B. Interim Sanctions C. Opportunity To Be Heard or Correct Conditions D. Procedures Appendix A—Compliance Review Process Appendix B—Summary of Requirements Appendix C—Glossary of Terms Appendix D—ASC Bulletins and Supplements Introduction and Purpose

Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), as amended (Title XI), established the Appraisal Subcommittee of the Federal Financial Institutions Examination Council (ASC).7 The purpose of Title XI is to provide protection of Federal financial and public policy interests by upholding Title XI requirements for appraisals performed for federally related transactions. Specifically those appraisals shall be performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision.

7The ASC board is made up of seven members. Five members are designated by the heads of the FFIEC agencies (Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and National Credit Union Administration). The other two members are designated by the heads of the Department of Housing and Urban Development and the Federal Housing Finance Agency.

Pursuant to Title XI, one of the ASC's core functions is to monitor the requirements established by the States8 for certification and licensing of appraisers qualified to perform appraisals in connection with federally related transactions.9 The ASC performs periodic Compliance Reviews10 of each State appraiser regulatory program (Program) to determine compliance, or lack thereof, with Title XI, and to assess the Program's implementation of theReal Property Appraiser Qualification Criteria(AQB Criteria) as adopted by the Appraiser Qualifications Board (AQB). The 50 States, District of Columbia, and four Territories11 have State appraiser certifying and licensing agencies (State agency or State) monitored by the ASC through the Compliance Review process.

8 SeeAppendix C,Glossary of Terms,for the definition of “State.”

9 SeeAppendix C,Glossary of Terms,for the definition of “federally related transaction.”

10 SeeAppendix A,Compliance Review Process.

11The four Territories are the Commonwealth of Puerto Rico, Commonwealth of the Northern Mariana Islands, Guam, and United States Virgin Islands.

Pursuant to authority granted to the ASC under Title XI, the ASC is issuing these Policy Statements12 to provide States with the necessary information to maintain their Programs in compliance with Title XI. Policy Statements 1 through 7 correspond with the categories that are evaluated during the Compliance Review process and included in the ASC Compliance Review Report (Report). Policy Statement 8 entitledInterim Sanctionssets forth required procedures in the event that interim sanctions are imposed against a State by the ASC.

12These Policy Statements, adopted ______, 2012, supersede all previous Policy Statements adopted by the ASC, the most recent version of which was issued in October 2008.

Policy Statement 1 Statutes, Regulations, Policies and Procedures Governing State Programs A. State Regulatory Structure

Title XI requires the ASC to monitor State agencies for the purpose of determining whether they have policies, practices and procedures consistent with Title XI.13 The ASC recognizes that each State may have legal, fiscal, regulatory or other factors that may influence the structure and organization of its Program. Therefore, a State has flexibility to structure its Program so long as it meets Title XI-related responsibilities.

13Title XI § 1118(a), 12 U.S.C. 3347.

States should maintain an organizational structure for appraiser certification, licensing and supervision that avoids conflicts of interest with other real estate-related professions. A State agency may be headed by a board, commission or an individual. State board14 or commission members, or employees in policy or decision-making positions, should understand and adhere to State statutes and regulations governing performance of responsibilities consistent with the highest ethical standards for public service. In addition, Programs using private entities or contractors should establish appropriate internal policies, procedures, and safeguards to promote compliance with the State agency's responsibilities under Title XI and these Policy Statements.

14 SeeAppendix C,Glossary of Terms,for the definition of “State board.”

B. Funding and Staffing

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended Title XI to require the ASC to determine whether States have sufficient funding and staffing to meet their Title XI requirements.15 On July 1, 2011, as part of its Compliance Review process, the ASC formally began requesting information and supporting documentation regarding funding and staffing of Programs. Compliance with this provision requires that a State must provide its Program with funding and staffing sufficient to carry out its Title XI-related duties. The ASC evaluates the sufficiency of funding and staffing as part of its review of all aspects of a Program's effectiveness, including the adequacy of State boards, committees, or commissions responsible for carrying out Title XI-related duties.

15 SeeAppendix D,Bulletin 2011-01.

C. Minimum Criteria

Title XI requires States to adopt and/or implement all relevant AQB Criteria. Historically, requirements established by a State for certified residential or certified general classifications have been required to meet or exceed AQB Criteria. Effective July 1, 2013, requirements established by a State for licensed appraisers, as well as for trainee and supervisory appraisers, must also meet or exceed the AQB Criteria, as required by the Dodd-Frank Act.16

16 SeeAppendix D,Bulletin 2011-01.

D. Federally Recognized Appraiser Classifications 1. State Certified Appraisers

“State certified appraisers” means those individuals who have satisfied the requirements for residential or general certification in a State whose criteria for certification meet or exceed the minimum AQB Criteria. Permitted scope of practice and designation for State certified residential or certified general appraisers must be consistent with State and Federal laws, including regulations and supplementary guidance.

2. State Licensed Appraisers

As of July 1, 2013, “State licensed appraisers” means those individuals who have satisfied the requirements for licensing in a State whose criteria for licensing meet or exceed the minimum AQB Criteria.17 Effective July 1, 2013, the permitted scope of practice and designation for State licensed appraisers must be consistent with State and Federal laws, including regulations and supplementary guidance.

17 SeeAppendix D,Supplement to Bulletin 2011-01.

3. Trainee Appraiser and Supervisory Appraiser

As of July 1, 2013, any minimum qualification requirements established by a State for individuals in the position of “trainee appraiser” and “supervisory appraiser” must meet or exceed the minimum AQB Criteria.18 ASC staff will evaluate State designations such as “registered appraiser,” “apprentice appraiser,” “provisional appraiser,” or any other similar designation to determine if, in substance, such designation is consistent with a “trainee appraiser” designation and, therefore, administered to comply with Title XI. Effective July 1, 2013, the permitted scope of practice and designation for trainee appraisers and supervisory appraisers must be consistent with State and Federal laws, including regulations and supplementary guidance.

18 SeeAppendix D,Bulletin 2011-01.

Any State or Federal agency may impose additional appraiser qualification requirements for State licensed, certified residential or certified general classifications, or for trainee and supervisor classifications, if they consider such requirements necessary to carry out their responsibilities under Federal and/or State statutes and regulations, so long as the additional qualification requirements do not conflict with AQB Criteria.

E. Non-Federally Recognized Credentials

States using non-federally recognized credentials or designations19 should ensure that they can be easily distinguished from the federally recognized credentials.

19 SeeAppendix C,Glossary of Terms,for the definition of “non-federally recognized credentials or designations.”

F. Appraisal Standards

Title XI and the Federal financial institutions regulatory agencies' regulations mandate that all appraisals performed in connection with federally related transactions be in written form, prepared in accordance with generally accepted appraisal standards as promulgated by the Appraisal Standards Board (ASB) in the Uniform Standards of Professional Appraisal Practice (USPAP), and subject to review for compliance with USPAP.20 States that have incorporated USPAP into State law should ensure that statutes or regulations are updated timely to adopt the latest version of USPAP, or if State law allows, automatically incorporate the latest version of USPAP. States should consider ASB Advisory Opinions, Frequently Asked Questions, and other written guidance issued by the ASB regarding interpretation and application of USPAP.

20 See Appendix C,Glossary of Termsfor the definition of “Uniform Standards of Professional Appraisal Practice”.

Any State or Federal agency may impose additional appraisal standards if they consider such standards necessary to carry out their responsibilities, so long as additional appraisal standards do not conflict with USPAP for work performed for federally related transactions.

G. Prohibition Against Discrimination

Title XI prohibits excluding appraisers from consideration for an assignment solely by virtue of their lack of membership in a nationally recognized professional appraisal organization.21 Moreover, the appraisal regulations of the Federal financial institutions regulatory agencies address the selection of an appraiser, considering appraiser independence, professional association membership, and competency. With regard to membership in a nationally recognized professional appraisal organization, the agencies' regulations prohibit a federally regulated financial institution from excluding an appraiser from consideration for an assignment solely by virtue of a membership or lack of membership in a particular organization. Such discrimination is also inappropriate by States in the administration of their Programs.

21Title XI § 1122(d), 12 U.S.C. 3351.

H. Exemptions

Title XI and the Federal financial institutions regulatory agencies' regulations specifically require the use of only State certified or licensed appraisers in connection with the appraisal of certain real estate-related financial transactions.22 A State may not exempt any individual or group of individuals from meeting the State's certification or licensing requirements if the individual or group member performs an appraisal when Federal statutes and regulations require the use of a certified or licensed appraiser. For example, an individual who has been exempted by the State from its appraiser certification or licensing requirements because he or she is an officer, director, employee or agent of a federally regulated financial institution would not be permitted to perform an appraisal in connection with a federally related transaction. States with exemption provisions must take steps to ensure that the provisions are not being used or interpreted in this manner.

22Title XI § 1112, 12 U.S.C. 3341; Title XI § 1113, 12 U.S.C. 3342; Title XI § 1114, 12 U.S.C. 3343.

I. ASC Staff Attendance at State Board Meetings

As part of the on-site Compliance Review process, ASC staff regularly attends State board meetings, including executive and/or closed sessions. States are expected to permit ASC staff to attend State board meetings except in the case of closed sessions for “quasi-judicial” proceedings specifically authorized and defined by State statute or regulation. The efficacy of the ASC's Compliance Review process rests on the ASC's ability to obtain reliable information about all areas of a State's Program. ASC staff is obligated to protect information obtained during the Compliance Review process concerningthe privacy of individuals and any confidential matters.

J. Summary of Requirements

Appendix B provides a summary of requirements and related implementation standards for each Policy Statement. The summary of requirements and implementation standards sets forth expectations for a State to demonstrate that its Program meets Title XI mandates.

Policy Statement 2 Temporary Practice A. Requirement for Temporary Practice

Title XI requires State agencies to recognize, on a temporary basis, the certification or license of an out-of-State appraiser entering the State for the purpose of completing an appraisal assignment23 for a federally related transaction. The out-of-State appraiser must register with the State agency in the State of temporary practice (host State). Thus, a credentialed appraiser24 from State A has a statutory right to enter State B to perform an assignment concerning a federally related transaction, so long as the appraiser registers with the State agency in State B prior to performing the assignment. Though Title XI contemplates reasonably free movement of credentialed appraisers across State lines, an out-of-State appraiser must comply with the host State's real estate appraisal statutes and regulations and is subject to the host State's full regulatory jurisdiction. States should rely on the National Registry to verify credential history on applicants for temporary practice.

23 SeeAppendix C,Glossary of Terms,for the definition of “assignment.”

24 SeeAppendix C,Glossary of Terms,for the definition of “credentialed appraisers.”

State agencies may establish by statute or regulation a policy that places reasonable limits on the number of times an out-of-State certified or licensed appraiser may exercise his or her temporary practice rights in a given year. If a State does not have an established policy, a State agency may choose to refuse to honor an out-of-State certified or licensed appraiser's temporary practice rights when a State has determined that the appraiser is abusing his or her temporary practice rights and is regularly engaging in real estate appraisal within the State.

B. Excessive Fees or Burdensome Requirements

Title XI prohibits States from imposing excessive fees or burdensome requirements, as determined by the ASC, for temporary practice.25 Adherence by State agencies to the following mandates and prohibitions will deter the imposition of excessive fees or burdensome requirements.

25Title XI § 1122(a) (2), 12 U.S.C. 3351.

1. Host State agencies must:

a. Issue temporary practice permits on an assignment basis;

b. Issue temporary practice permits within five business days of receipt of a completed application, or notify the applicant and document the file as to the circumstances justifying delay or other action;

c. Issue temporary practice permits designating the actual date of issuance;

d. Take regulatory responsibility for a temporary practitioner's unethical, incompetent and/or fraudulent practices performed while in the State;

e. Notify the appraiser's home State agency26 in the case of disciplinary action concerning a temporary practitioner; and

26See Appendix C, Glossary of Terms, for the definition of “home State agency.”

f. Allow at least one temporary practice permit extension through a streamlined process.

2. Host State agencies may not:

a. Limit the valid time period of a temporary practice permit to less than 6 months, except in the case of an appraiser not holding a credential in active status for at least that period of time;

b. Limit an appraiser to one temporary practice permit per calendar year;27

27State agencies may establish by statute or regulation a policy that places reasonable limits on the number of times an out-of-State certified or licensed appraiser may exercise his or her temporary practice rights in a given year. If such a policy is not established, a State agency may choose not to honor an out-of-State certified or licensed appraiser's temporary practice rights if it has made a determination that the appraiser is abusing his or her temporary practice rights and is regularly engaging in real estate appraisal services within the State.

c. Charge a temporary practice permit fee exceeding $250, including one extension fee;

d. Impose State appraiser qualification requirements upon temporary practitioners that exceed AQB Criteria for the credential held;

e. Require temporary practitioners to obtain a certification or license in the State of temporary practice;

f. Require temporary practitioners to affiliate with an in-State licensed or certified appraiser;

g. Refuse to register licensed or certified appraisers seeking temporary practice in a State that does not have a licensed or certified level credential; or

h. Prohibit temporary practice.

3. Home State agencies may not:

a. Delay the issuance of a written “letter of good standing” or similar document for more than five business days after receipt of a request; or

b. Fail to take disciplinary action, if appropriate, when one of its certified or licensed appraisers is disciplined by another State agency for unethical, incompetent or fraudulent practices under a temporary practice permit.

C. Summary of Requirements

Appendix B provides a summary of requirements and related implementation standards for each Policy Statement. The summary of requirements and implementation standards sets forth expectations for a State to demonstrate that its Program meets Title XI mandates.

Policy Statement 3 National Registry A. Requirements for the National Registry

Title XI requires the ASC to maintain a National Registry of State certified and licensed appraisers who are eligible to perform appraisals in federally related transactions.28 Title XI further requires the States to transmit to the ASC: (1) A roster listing individuals who have received a State certification or license in accordance with Title XI; (2) reports on the issuance and renewal of licenses and certifications, sanctions, disciplinary actions, revocations and suspensions; and (3) the Registry fee as set by the ASC29 from individuals who have received certification or licensing. States must notify the ASC upon determination if a credential holder listed on the National Registry does not, or did not, qualify for the credential held.

28Title XI § 1103(a)(3), 12 U.S.C. 3332.

29Title XI § 1109,Roster of State certified or licensed appraisers; authority to collect and transmit fees,requires the ASC to consider at least once every 5 years whether to adjust the dollar amount of the registry fees to account for inflation. (Title XI § 1109(a), 12 U.S.C. 3338.)

Roster and Registry fee requirements apply to all individuals who receive State certifications or licenses, originally or by reciprocity, whether or not the individuals are, in fact, performing or planning to perform appraisals in federally related transactions. If an appraiser is certified or licensed in more than one State, the appraiser is required to be on each State's roster of certified or licensed appraisers, and a Registry fee is due from each State in which the appraiser is certified or licensed.

Only AQB-compliant certified appraisers in active status on theNational Registry are eligible to perform appraisals in connection with federally related transactions. In order for a licensed appraiser to be listed on the National Registry as AQB-compliant, that individual must satisfy requirements for licensing in a State whose criteria meet or exceed AQB Criteria. Beginning July 1, 2013, only AQB-compliant licensed appraisers in active status on the National Registry are eligible to perform appraisals in connection with federally related transactions.30

30 SeeAppendix D,Supplement to Bulletin 2011-01.

Some States may give State certified or licensed appraisers an option to not pay the Registry fee. If a State certified or licensed appraiser chooses not to pay the Registry fee, then the Program must ensure that any potential user of that appraiser's services is aware that the appraiser's certificate or license is limited to performing appraisals in connection with non-federally related transactions.31 The Program must place a conspicuous notice directly on the face of any evidence of the appraiser's authority to appraise stating, “Not Eligible To Appraise Federally Related Transactions,” and the appraiser must not be listed in active status on the National Registry.

31 SeeAppendix C,Glossary of Terms,for the definition of “non-federally related transactions.”

The ASC extranet application allows States to update their appraiser credential information directly to the National Registry. Only Authorized Registry Officials are allowed to request access for their State personnel (see section C below). The ASC will issue a UserName and Password to the designated State personnel responsible for that State's National Registry entries. Designated State personnel are required to protect the right of access, and not share their UserName or Password with anyone. State agencies must adopt and implement a written policy to adequately protect the right of access, as well as the ASC issued UserName and Password.

For those States not using the ASC extranet application, the ASC has provided detailed specifications regarding the data elements on the National Registry and reporting procedures.32

32 Seesection D,Information Sharing,below requiring all States to report disciplinary action via the extranet application by July 1, 2013.

The ASC creates a National Registry number for each appraiser and protects each appraiser's privacy rights. The unique identification number is provided to appropriate State and Federal regulatory agencies to simplify multi-State queries regarding specific appraisers.

B. Registry Fee and Invoicing Policies

Each State must remit to the ASC the annual Registry fee, as set by the ASC, for State certified or licensed appraisers within the State to be listed on the National Registry.33 Requests to prorate refunds or partial-year registrations will not be granted. If a State collects multiple-year fees for multiple-year certifications or licenses, the State may choose to remit to the ASC the total amount of the multiple-year Registry fees, or to remit annually. The ASC will record appraisers on the National Registry only for the number of years paid. When a State's failure to pay a past due invoice results in appraisers being listed as inactive, the ASC will not change those appraisers back to active status until payment is received. An inactive status on the National Registry, for whatever the reason, renders an appraiser ineligible to perform appraisals in connection with federally related transactions.

33 SeeAppendix D,Bulletin 10-1, October 14, 2010.Under authority in the Dodd-Frank Act, the ASC approved a modification of the annual Registry fee to $40 (from $25) at its meeting of October 13, 2010. The ASC raised the Registry fee to support its supervisory activities, including additional authority and responsibility under the Dodd-Frank Act.

C. Access to National Registry Data

The ASC Web site provides free access to the public portion of the National Registry atwww.asc.gov.The public portion of the National Registry data may be downloaded using predefined queries or user-customized applications.

Access to the full database, which includes some non-public data (e.g., certain disciplinary action information), is restricted to authorized State and Federal regulatory agencies. States must designate a high ranking officer, such as an executive director, to serve as the State's Authorized Registry Official, and provide to the ASC, in writing, information regarding the designated Authorized Registry Official. States should ensure that the authorization information provided to the ASC is updated and accurate.

D. Information Sharing

Information sharing (routine exchange of certain information among lenders, governmental entities, State agencies and the ASC) is essential for carrying out Title XI. Title XI requires the ASC, any other Federal agency or instrumentality, or any federally recognized entity to report any action of a State certified or licensed appraiser that is contrary to the purposes of Title XI to the appropriate State agency for disposition. The ASC believes that full implementation of this Title XI requirement is vital to the integrity of the system of State appraiser regulation.

The National Registry's value and usefulness are largely dependent on the quality and frequency of State's data submissions. Accurate and frequent data submissions from all States are necessary to maintain an up-to-date National Registry. States must submit appraiser data to the ASC at least monthly. If there are no changes to the data, the State agency must notify the ASC of that fact in writing. States are encouraged to submit data as frequently as possible.

State agencies must report expeditiously any disciplinary action34 taken against an appraiser to the ASC. As of July 1, 2013, all States will be required to report disciplinary action via the extranet application as soon as practicable for the State to do so. States not reporting via the extranet application will be required to provide, in writing to the ASC, circumstances preventing compliance with this requirement. Prior to July 1, 2013, at a minimum, this information must be submitted with the State's monthly, or more frequent, Registry data submission. For the most serious disciplinary actions (i.e., voluntary surrenders, suspensions and revocations, or any action that interrupts a credential holder's ability to practice), the State agency must notify the ASC as soon as practicable in order for the ASC to inactivate the appraiser's status on the National Registry, thereby making the appraiser ineligible to perform appraisals in connection with federally related transactions, or other transactions requiring the use of State certified or licensed appraisers.

34 SeeAppendix C,Glossary of Terms,for the definition of “disciplinary action.”

Title XI contemplates the reasonably free movement of certified and licensed appraisers across State lines. This freedom of movement assumes, however, that certified and licensed appraisers are, in all cases, held accountable and responsible for their actions while performing appraisal activities. To ensure this accountability, States should establish routine ways to communicate with each other regarding matters of mutual interest, including the activities and status of persons who are certified or licensed in multiple States.

E. Summary of Requirements

Appendix B provides a summary of requirements and related implementation standards for each Policy Statement. The summary of requirements and implementation standards sets forth expectations for a State to demonstrate that its Program meets Title XI mandates.

Policy Statement 4 Application Process

AQB Criteria sets forth the minimum education, experience and examination requirements for credentialing of real property appraisers. In the application process, States must, at a minimum, employ a reliable means of validating both education and experience credit claimed by applicants for credentialing.35

35Includes applications for credentialing of State licensed, certified residential or certified general classifications, and trainee and supervisor classifications.

A. Processing of Applications

States must process applications in a consistent, equitable and well-documented manner.

States must ensure appraiser credential applications submitted for processing do not contain expired examinations as established by AQB Criteria (24-month examination validity period).

Applications for credentialing should be timely processed by State agencies (within 90 days). Any delay in the processing of applications should be sufficiently documented in the file to justify the delay.

B. Qualifying Education for Initial or Upgrade Applications

States must verify that:

(1) The applicant's claimed education courses are acceptable under AQB Criteria; and

(2) The applicant has successfully completed courses consistent with AQB Criteria for the appraiser credential sought.

Documentation must be provided by applicants to support education claimed by applicants for initial credentialing or upgrade.

States may not accept an affidavit for education claimed from applicants for certification.

Effective July 1, 2013, States may not accept an affidavit for education claimed from applicants for any federally recognized credential.36

36If a State accepts education-related affidavits from applicants for initial licensure in any non-certified classification, upon the appraiser's application to upgrade to a certified classification, the State must require documentation to support the appraiser's educational qualification for the certified classification, not just the incremental amount of education required to move from the non-certified to the certified classification.

States must maintain adequate documentation to support verification of claimed education by applicants.

C. Continuing Education for Reinstatement and Renewal Applications 1. Reinstatement Applications

States must verify that:

(1) The applicant's claimed continuing education courses are acceptable under AQB Criteria; and

(2) The applicant has successfully completed all continuing education consistent with AQB Criteria for reinstatement of the appraiser credential sought.

Documentation must be provided by applicants to support continuing education claimed by applicants for reinstatement.

States may not accept an affidavit for continuing education claimed from applicants for reinstatement.

States must maintain adequate documentation to support verification of claimed education.

2. Renewal Applications

States must ensure that continuing education courses for renewal of an appraiser credential are consistent with AQB Criteria.

States must ensure that continuing education hours required for renewal of an appraiser credential were completed consistent with AQB Criteria.

States may accept affidavits for continuing education credit claimed for credential renewal so long as the State implements a reliable validation procedure that adheres to the following objectives and requirements:

a. Validation objectives—The State's validation procedures must be structured to permit acceptable projections of the sample results to the entire population of subject appraisers. Therefore, the sample must include an adequate number of affidavits to have an acceptable chance of identifying appraisers who fail to comply with AQB Criteria, and the sample must include a reasonable representation of the appraiser population being sampled.

b. Minimum Standards—The following minimum standards apply to these audits:

(1) Validation must include a prompt post-approval audit. Each audit of an affidavit for continuing education credit claimed must be completed within 60 days from the date the renewed credential is issued;

(2) States must audit the continuing education-related affidavit for each credentialed appraiser selected in the sampling procedure;

(3) The State must determine that the education courses claimed conform to AQB Criteria and that the appraiser successfully completed each course;

(4) When a State determines that an appraiser's continuing education does not meet AQB Criteria, the State must take appropriate action to suspend the appraiser's eligibility to perform appraisals in federally related transactions until such time that the requisite continuing education has been completed. Also, upon such a determination, the State must notify the ASC as soon as practicable in order for the appraiser's record on the National Registry to be updated appropriately; and

(5) If more than ten percent of the audited appraisers fail to meet the AQB Criteria, the State must take remedial action37 to address the apparent weakness of its affidavit process. The ASC will determine on a case-by-case basis whether remedial actions are effective and acceptable.

37For example:

(1) A State may conduct an additional audit using a higher percentage of audited appraisers; or

(2) a State may publically post action taken to sanction non-compliant appraisers to increase awareness in the appraiser community of the importance of compliance with continuing education requirements.

c. Documentation—States must maintain adequate documentation to support its affidavit renewal and audit procedures and actions.

d. List of Education Courses—To promote a